Homebuilders and sector-related exchange traded funds may be shedding off the winter freeze with the official start of the spring season as home construction companies offer an optimistic outlook.
“This is the start of the best spring selling season of the past five years,” RBC Capital Markets analyst Robert Wetenhall Jr. said in a Wall Street Journal article.
The industry is hoping that it will experience a quick rebound after experiencing a 17% plunge in housing starts over February and seeing weak mortgage applications due to the extended winter storms.
In its quarterly report, Lennar revealed deliveries increased 19%, new orders – an indicator of builders’ future performance – increased 18% and sales jumped 21%. LEN makes up 3.4% of XHB and 10.8% of ITB.
Lennar, along with other top builders, have attributed their double-digit gains in sales to factors like the growing economy, rising job growth and low interest rates. Together the top six builders revealed an average 19% rise in orders over the last quarter, up from 3.3% int he same period last year, Reuters reports.
The positive readings on homebuilders activity suggests that the February housing starts fall were a result of the harsh winter weather, rather than weakness in underlying demand.
“An early read from this spring selling season suggests that the market is continuing to improve at a very steady pace,” Stuart Miller, CEO of Lennar Corp. (NYSE: LEN), said in the article.
Moreover, the housing market is seeing greater demand after the federal government eased access to credit, such as lowering premiums on loans insured by the Federal Housing Administration.
“Lenders are, in fact, opening their doors a bit wider,” Stan Humphries, chief economist at real estate website Zillow.com, said in the Reuters article, adding that this would help first-time buyers.
SPDR S&P Homebuilders ETF
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Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.